Government subsidies

6 June 2016

An agricultural subsidy can be defined as a grant offered to farmers for their products. These subsidies are provided in order to add-on to farmers incomes, to control the costs of agricultural products in the market and to regulate supply of these products. The US government is required by the law to provide farm subsidies and is required to grant about twelve products. Some of the products that the government of US has subsidized include; corn, maize, wheat, barley, cotton, peanuts, milk, sugar among other products. (Robert, 2004)

Agricultural subsidies have been in place ever since the early twentieth century. In the 1930s, farmers were very vulnerable to price fluctuations. This vulnerability caused them to strike in order to get the governments attention. A law was passed to protect them through tariffs.

This was not very successful because it caused the international market to fear imports from the US. Years later, the government introduced another law that facilitated the control of goods produced by farmers, purchase of excess products and provisions for minimum payment to farmers. These changes that were made in the 1950s are still in place today. Some slight modifications have been made but the basics have been retained.

Agricultural subsidies have had a lot of changes over the past decades in the country. In the early twentieth Century, there was a large chunk of the country’s population that engaged and resided in farms. At that time in history, farmers took up a large portion of grants. In the recent years, this has dramatically changed largely due to the fact that the number of farmers has reduced dramatically consequently reducing the amount of funds spent on them.

A subsidy normally focuses on a particular product. This entails price considerations in that farmers are granted a certain amount of cash for a specific weight of product. On top of that payment, farmers expect a fixed price for any subsidized crop. So if market prices are lower than what farmers were promised, then the government compensates farmers for this balance. Payments are obtained from taxes meaning that the rest of the country’s population is involved on this matter

Part 1: Government subsidies

There are scores of subsidies that re currently offered by the government. But they can all be placed under certain groupings. These are what will be examined in detail below; (Robert, 2004)

Export subsidies can be described as a settlement between the government and farmers regarding crops or agricultural products that will be exported or sold internationally. It was initiated in order to ensure that farmers have adequate funding when exporting their products. This kind of subsidization can sometimes result in farmers having extra finances. This implies that they can be able to sell their goods in target countries at a price that may be lower than cost of production. Consequently, farmers in those host countries maybe out competed.

This has caused developing countries to raise an alarm. The United States has taken its exports to many countries some of which include South American countries. Some of the proponents of this type of subsidy claim that it perpetuates low prices for commodities in developing countries. This means that locals in those importing countries can be able to purchase agricultural goods at low prices. Complaints have been registered about cases of dumping in these countries: Where agricultural dumping is the sale of products at unfairly low prices that exceed their cost of production. This is propagated by availability of extra funds from export subsidies.

Conservation payments are also another type of subsidy offered by the US government. The subsidies are normally done in support of the environment and for conservation purposes. The two plans under which this subsidy is implemented are the Conservation Security Program and the Conservation Reserve Program. It normally targets farmers that use environmentally friendly methods for their practices.

This program was initiated after it was observed that agricultural activities cause immense pollution to the country’s resources. In the year 2003, the government spent close to two billion dollars on payments related to this scheme. Supporters of this type of subsidy claim that it protects the environment through promotion of environmentally friendly practices. These include issues like growth of nutrient-rich crops like beans rather than those that consume nutrients like corn, use of contour stripping and other methods that eradicate soil erosion.

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